DiNapoli: NY Pension Fund Reaches Climate Agreements With Five Portfolio Companies

August 27, 2024

The New York State Common Retirement Fund (Fund) reached climate-related agreements with five portfolio companies during the 2024 proxy season and added $2 billion to the MSCI World ex-USA Climate Change Index strategy, State Comptroller Thomas P. DiNapoli announced today, along with releasing the fourth annual Climate Action Plan Progress Report.

"As trustee of the Fund, one of my top priorities is safeguarding the investments made for the benefit of the more than one million participants in the New York State retirement system," DiNapoli said. "To foster long-term financial success, it is essential to address the climate-oriented investment challenges faced by the Fund's portfolio. Climate change is an increasingly urgent risk facing all investors."

The Fund reached agreements with Southwest Airlines Inc. and steel-maker Cleveland-Cliffs Inc. to set greenhouse gas emissions (GHG) reduction targets and publicly disclose climate transition action plans. The utility WEC Energy Group Inc. agreed to publicly disclose a feasibility study on integrating climate metrics into its executive compensation plan. McDonald's Corp. agreed to assess supply chain water-related business risks and/or set water quality and quantity targets, while Realty Income Corp., a real estate investment trust, agreed to adopt and publish a low-carbon transition plan.

DiNapoli also made an additional investment of $2 billion to a fund tracking the MSCI World ex-USA Climate Change Index, which is designed to address climate-related risks by increasing the weighting of companies that engage in climate solutions and decreasing the weighting of companies that face greater climate transition risks. The index aims to reduce its overall Scope 1, 2, and 3 greenhouse gas emissions intensity by a minimum of 30% relative to its benchmark. The investment follows an initial allocation of $1 billion made to this strategy in March 2023.

Proxy Votes

In February, the Fund amended its proxy voting guidelines to include updates on the Fund's expectations for portfolio companies' climate performance including climate transition plans, and comprehensive disclosure of such plans, climate risks, risk management, governance, targets, metrics, and opportunities. It also provided more clarity regarding physical risk, deforestation, and the potential impacts of biodiversity loss.

During the 2024 proxy season, the Fund withheld support from or voted against 1,900 individual directors at over 600 portfolio companies that lacked robust climate risk management, including ConocoPhillips Co., Lockheed Martin Corp., and Exxon Mobil Corp. The fund also supported the following shareholder proposals: Southern Co., seeking disclosure of short- medium- and long-term operational GHG targets; Chevron Corp., seeking disclosure of how reductions in virgin plastic demand may impact its financial position; and Amazon.com Inc., seeking disclosure of how it is addressing the impact of its climate change strategy on key stakeholders.

SICS Investments

To date, the Fund has deployed over $22 billion, towards its goal of $40 billion, to specific investment opportunities across asset classes in its Sustainable Investments and Climate Solutions (SICS) program, the majority of which are investments in climate solutions. Investments include actively and passively managed public equity, climate-oriented index funds, green bonds, sustainable infrastructure funds, and real estate investments with energy efficient buildings.

Investments over the past year include:

• Copenhagen Infrastructure V (€300 million), a Danish investment firm specializing in renewable energy infrastructure assets, including onshore and offshore wind, that contribute to a green energy transition.
• Carlyle Renewable and Sustainable Energy Fund II ($200 million), a North American private equity fund that makes targeted investments in renewable energy sources, such as solar, wind, battery energy storage systems and energy transition, electric vehicles, distributed energy resources, and decarbonization technology solutions principally in Organization for Economic Cooperation and Development markets.
• EQT Fund VI ($450 million), a Swedish infrastructure fund that makes private investments with a focus on decarbonization, resource efficiency, and pollution control.
• Fundamental Empire Fund ($375 million), a North American fund that opportunistically makes investments in affordable and workforce housing, renewable energy, infrastructure, and municipal assets.

In 2019, DiNapoli released a Climate Action Plan, a multi-faceted strategy to invest in sustainable companies, pursue climate solution investments, and apply minimum standards to inform engagements and potential divestment decisions. Each year since, DiNapoli has issued a progress report on the plan.

The New York State Common Retirement Fund is one of the largest public pension funds in the United States. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. It has consistently been ranked as one of the best managed and best funded plans in the nation.

Report
Progress Report on the New York State Common Retirement Fund's Climate Action Plan